Updates on insider trading by federal judges and senior staff of Federal Reserve.

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Previously discussed Financial conflict of interest on the federal bench and stock trading by presidents of regional Federal Reserve Banks. Alternate headline – Is there any group of powerful people who bother to follow the rules?

The Wall Street Journal reported that 131 judges had an investment in one or many stocks of litigants who appeared in front of them.

Two presidents of regional Federal Reserve Banks were trading stocks during the tumultuous early months of the pandemic.

Two updates in the news recently. First, the situation with judges is worse than it appears. Second, restrictions have been placed on extremely senior staff of the Fed prohibiting them from owning individual stocks.

Wall Street Journal – 10/21/21 – Fed Imposes New Restrictions on Officials’ Investment Activities – The new rules will apply to the seven governors sitting on the board of the Federal Reserve, the 12 presidents of the regional Federal Reserve Banks, and an unspecified number of senior staff who work with the rate-setting committees.

The affected individuals will only be allowed to invest in diversified vehicles, such as mutual funds. Purchases and sales will require advance approval. All trades will require a 45 day delay between the transaction and when they advise the internal monitor they want to buy or sell.

Not a bad start – restricted to mutual funds, delay transactions 45 days, and get advance approval.

Situation with the federal judges is worse than I thought.

Wall Street Journal – 10/15/21 – Federal Judges or Their Brokers Traded Stocks of Litigants During Cases –The Journal previously identified 131 federal judges who owned stock of a litigant while a judge was handling the case involving the company. In such a situation, a federal judge is required by law to recuse from the case. The reporters identified 685 violations of recusal requirements.

Additional analysis shows that 61 of those judges were actively trading stock in companies appearing before them or their brokers were actively trading stock while the case is in progress.

Active trading.

With a litigant in front of them.

In quite a depressing turn of events, an unspecified number of those judges claimed they did not know that stocks were being traded on their behalf. They did not know what their brokers were doing.

In the strongest terms possible, I urgently suggest you do not claim total, complete, willfully blind ignorance of the critical facts if you ever appear in front of a federal judge. Not having the foggiest stinking clue of anything that’s going on with things under your complete control is only acceptable for a federal judge.

Again, please, please do not take that strategy if you ever find yourself in front of any judge. You don’t have anywhere near enough clout to get away with it.

Just to be clear, federal law and judicial ethics make a judge responsible for all transactions and holdings in the judge’s investment portfolio. There is no ignorance exception.

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